AUD/USD Forecast: Remains vulnerable to extend losses
- The move from trade deals to coronavirus in China impacts equity markets.
- Aussie has underperformed despite improvement in global sentiment and better-than-expected Australian labor report.
- AUD/USD bearish, could stabilise if it recovers 0.6830/40.
The AUD/USD pair is about to end the week with a modest decline, hovering around 0.6830. It bottomed late on Friday at 0.6819, the lowest level in six weeks. Previously it recovered boosted by Australian data. The rally found resistance below 0.6880 and then pulled back toward the weekly lows.
From a fundamental perspective, analysts argue that global manufacturing may have bottomed out following the preliminary PMIs in Japan, UK, US and Europe; that could offer support to the aussie. The key risks in the short-term continue to be Australian data and the spread of the virus.
Next week, official data on China's manufacturing and non-manufacturing PMI is due. In Australia, the key report will be inflation. The annual Consumer Price Index is seen at 1.7% over the fourth quarter. In the US, the Federal Reserve will have its meeting. Monetary policy is expected to remains unchanged. Another relevant report will be US Q4 GDP growth on Thursday. Markets are ignoring Trump’s impeachment while tensions in the Middle East eased over the last days but remains a risk.
AUD/USD Technical Outlook
The daily chart shows AUD/USD testing an ascendant trendline from October lows, offering some support around 0.6825/30 and also near the 100 SMA at 0.6840. If it consolidates below 0.6825/30 more losses seems likely. The next strong support is seen at 0.6795/0.6800, followed by 0.6765.
If the Aussie manages to remain above 0.6830, it could point to some stabilisation but still within a bearish case, as technical indicators point south, momentum below 100 and price under the 20 SMA. A daily close above 0.6860 would alleviate the bearish pressure, and it could extend to the 20 SMA at 0.6880. Above, the pair has room to rise further, targeting 0.6920.
AUD/USD sentiment poll
The FXStreet Forecast Poll indicates that the market still see weakness in the AUD/USD pair over the short-term but it also shows expectations of a recovery, in the period from one to three months. Despite some optimism for a move to the upside in a one month period, it is seen mostly trading around current or lower levels in three months.
The Overview chart shows the monthly and quarterly moving average turned south again but still above the current price, although not very far. While some analysts forecast it will trade above 0.70 in three months, others see the pair vulnerable for a break below 0.6700.
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
